Key facts
- Sweetgreen shares fell 15% in premarket trading.
- The company slashed its annual same-store-sales projections to a 7%-8% decline from a previous forecast of 2%-4% drop.
- Reduced consumer demand since mid-July is attributed to concerns over a cyclosporiasis outbreak.
- Second-quarter same-store sales declined 6.2%.
- Sweetgreen recalled jalapenos due to a Salmonella outbreak investigation.
- The company does not use iceberg lettuce, linked to the cyclosporiasis outbreak.
Sweetgreen shares tumbled 15% in premarket trading as the salad chain significantly lowered its annual same-store-sales projections, citing a decline in consumer demand driven by fears surrounding a widespread cyclosporiasis outbreak. The company now anticipates a 7% to 8% drop in annual same-store sales, a stark revision from its earlier forecast of a 2% to 4% decline.
This downturn in consumer confidence, which began in mid-July, has impacted sales momentum, with CFO Jamie McConnell noting that cyclospora headlines affected July comparable sales by approximately 600 basis points. For the second quarter ended June 28, Sweetgreen reported a 6.2% decrease in same-store sales, an improvement from the 7.6% decline recorded a year prior.
Amidst the outbreak, which has been linked to recalled iceberg lettuce from central Mexico, Sweetgreen has emphasized that it does not use iceberg lettuce on its menu and has no indication of being connected to the illness. However, the broader concerns about food safety have led some consumers to reduce their consumption of fresh produce and avoid certain restaurant chains. In a separate development, Sweetgreen also recalled some jalapenos earlier in the week due to an ongoing Salmonella outbreak investigation linked to Mexican jalapeno peppers.